This may be your very first bank account or you have simply grown to dislike your bank or credit union. Maybe you have grown to think that your bank is secretly an “Umbrella Corporation” style evil company and need to keep your money somewhere while you seek revenge — I don’t judge. Whether you are looking for a bank or a credit union, there are a few things you should look into before deciding on one.
Is Your Money Insured?
The first thing you should know is what money will and will not be insured. In America, you will be looking for a bank insured by the FDIC (Federal Deposit Insurance Corporation) or a credit union insured by the NCUA (National Credit Union Administration). Canada has a very similar organization insuring both their credit unions and banks, the CDIC, or the Canada Deposit Insurance Corporation.
Now that you have found an insured institution, it is important to know exactly what these organizations insure. In America, both credit unions’ and banks’ accounts will be insured up to $250,000 per person, per organization. In Canada, the CDIC will insure up to $100,000 per person, per organization. While this is a hefty $150,000 less than the American equivalent (without including the exchange rate), this doesn’t matter to me as a university student with a part-time job and it probably won’t to you, unless you have a quarter of a million dollars in your accounts.
It is important to note that not all accounts are insured by these organizations, as none of the three organizations insure accounts such as mutual funds or foreign currency deposits. However, if you are reading this, you are likely looking for a savings and/or checking (chequing) accounts, both of which are insured by the FDIC, CDIC, and NCUA.
Not all accounts are created equal, and neither are all fees. Not every fee is a Non-Sufficient Funds, or NSF, fee. The credit union I use recently adjusted their checking accounts to include three tiers; while the top tier offers the highest dividends, it also requires the most money moving in and out of the account to avoid fees. Certain accounts may have fees if the account holder does not use their debit card enough times or had enough money move into and out of the account within a month. It is very important that you know what will incur fees for your account and, if they are unacceptable, switching to a more forgiving account.
Dividends are what got me interested in finance and got me to leave the bank that held the account set up for me when I was quite young. I started trading stocks and saw that stocks had dividends that reached into double digits and I was curious about my account. I called the bank and was less than pleased to hear that my account yielded less than .08% over the course of the year!
I started to look around and found that credit unions offered better, but still quite low annual percentage yield (APY), which is the amount credited to the account over the course of the year. With savings and checking accounts, there is less variance from institution to institution, but when every little bit helps, it may be something about which to ask.
About Kenneth Koehn:
Kenneth Koehn is an American university student majoring in Cyber Forensics & Security with an interest in finance. He has experience working in the finance field and investing with a focus on high dividend yield. When he isn’t in class or at work, he enjoys reading and gardening. He can be reached on LinkedIn at https://www.linkedin.com/in/kenneth-koehn/